There was plenty of evidence of that pressure, exacerbated by the effects of Hurricane Sandy. Applications for unemployment benefits jumped more than expected, rising 78,000 to 439,000 in the week ended November 10, according to Labor Department data.

A worrying sign indeed. "We will likely see a step back in job growth," Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania, told Reuters.

Separately, data from the Philadelphia Federal Reserve Bank and the New York Federal Reserve Bank showed that indexes of manufacturing shrank in those regions this month.

The latest data only add to the need for President Barack Obama and lawmakers to find a way to avoid the so-called fiscal cliff, a mix of tax increases and spending cuts that will kick in automatically on January 1 and risk hampering the already-fragile economy.

In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.38 per cent, while the Standard & Poor's 500 and the Nasdaq Composite Index each shed 0.48 per cent.

In Europe, the Stoxx 600 Index ended the day with a 1 per cent slide from the previous close. The FTSE 100 and Germany's DAX each dropped 0.8 per cent. France's CAC 40 shed 0.5 per cent.

There was more bad news for the euro zone economy. The latest data showed that the region's gross domestic product dropped 0.1 per cent in the quarter, after a 0.2 per cent decline in the second quarter.

A Reuters poll of more than 70 economists predicted the bloc's new recession will extend until the end of the year and 2013 promises little better than stagnation. Conducted before Thursday's data were released, the consensus was for a 2012 contraction of 0.5 per cent and only 0.1 per cent growth next year.

"The euro zone as a whole has slipped back into recession," Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, wrote in an email to Bloomberg News.

"Europe's economic downturn has not only deepened, it has also broadened with the core of the euro zone now much more affected. The bleak economic data out of Europe will further undermine sentiment," according to Spiro.

In other news, BP said it reached a settlement with the US government to pay US$4.5 billion in penalties, settling all criminal charges and resolving securities claims relating to the Deepwater Horizon oil spill.